Immigrants and Job Creation—Another Case for Reform

In this week’s TIME Magazine and on last Sunday’s CNN prime-time special, Fareed Zakaria focused on the shortcomings of the U.S. immigration policy and its current and future impact upon the U.S. economy. A lot of the discussion was about the inability of high-skilled immigrants to stay in the United States and how it influences the competitiveness of U.S.-based companies. In a related post, my colleagues Neil Ruiz and Jill Wilson touch upon this subject in an explanation of the recently-reached H-1B cap for fiscal year 2013. Audrey Singer, another colleague at the Brookings Institution, takes Zakaria’s argument further into the debate about employment opportunities for low-and medium-skilled immigrants who are already in the United States.

But immigrants do not come to the United States only to look for a job. Many create jobs for others. Two recently released reports using data from the 2007 Survey of Business Owners, the 2010 Current Population Survey, and the 2010 American Community Survey provide evidence that immigrants are more likely to start and own a small business than U.S.-born Americans.

According to a Small Business Administration report, immigrants were more than twice as likely than non-immigrant workers to start a business in 2010. They also tend to own their own businesses, with 10.5 percent of the immigrant labor force owning a business compared with 9.3 percent of the U.S.-born labor force. And no, they are not all self-employed. In fact, immigrant-owned businesses are slightly more likely to hire an additional person than non-immigrant-owned firms.

In many U.S. metro areas immigrants are the backbone of the small-business sector. As shown by a Fiscal Policy Institute report, 45 percent of Miami’s small-business owners are immigrants, similar to Los Angeles’s rate. But this is not only about the largest metro areas in the country. In Baltimore, immigrants are about twice as likely as U.S.-born workers to be business owners.

Additionally, beyond small business formation, the foreign born also are also responsible for a significant number of jobs.

According to the Fiscal Policy Institute study, immigrant-owned small businesses—firms with at least one and fewer than 100 people working for them—employed an estimated 4.7 million people in 2007, 14 percent of all people employed by small business owners that year.

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And these are only small businesses, not taking into account giants like Google and Yahoo, large firms that list a foreign-born co-founder.

Recessions are always times of revived protectionism and economic nationalism, when people feel that foreigners undercut their opportunities. The evidence shows quite the opposite. Rather than dividing a shrinking “jobs pie,” the foreign born help make it bigger. In these volatile and uncertain economic times, there has never been a better moment for policymakers to address forcefully the immigration issue than now.